The FHA Energy Efficient Mortgage Program

If you’re interested in purchasing or refinancing a home that would benefit from energy efficient improvements, consider the FHA Energy Efficient Mortgage (EEM) program. This privately funded, government-backed home financing option to fund the purchase of a home and cover the costs of approved energy efficient improvements on the home. In this week’s blog from Nickel City Funding, we’ll talk about this little-known mortgage program. If you’re interested in buying a home in North Tonawanda, Hamburg, Amherst, West Seneca, Lancaster, or nearby NY, contact us with any questions about EEM or other mortgage options.

EEM Program Background

The EEM program, like FHA loans and FHA 203(k) Rehabilitation loans, are sponsored by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD). This program was first started in 1992 in a few states, then expanded across the United States a few years later. The HUD developed it to help borrowers save money on energy payments after improvements are made, which frees up money for mortgage payments and other expenses.

Like other FHA loans, they have less stringent approval requirements than conventional loans. One of the great benefits of EEM is that borrowers only need to get approved for the loan amount used to purchase or refinance a home – they do not have to qualify for the additional cost of the energy improvements. The EEM can be combined with several other loan programs, including the Section 203(k) Rehabilitation Mortgage.

The Energy Improvements

The portion of your mortgage appropriated to energy efficient improvements is known as the “energy package.” Borrowers get to select which energy improvements they would like to make while working with a qualified in-home energy assessor. The package pays for labor, equipment, inspections, and the assessment.

The value of the energy package is the lesser of:

  • The costs of the energy package as determined by an audit, or
  • The lesser of the home’s adjusted value, 115% of the median area value of a single-family dwelling, or 150% of the national conforming mortgage limit

Using the EEM with an Existing Home

If you want to remodel or refinance an existing home, you can still use the EEM mortgage. If you have an existing FHA loan, you do not have to re-qualify or make another down payment. You will need to pay closing costs, however, the closing costs are based on a percentage of the home’s value before improvements are made, which means lower costs.

If you’d like to save money on home financing while upgrading to a more energy efficient, greener home, the FHA Energy Efficient Mortgage program may be right for you. This program is available to clients everywhere, including North Tonawanda, Hamburg, Amherst, West Seneca, and Lancaster. Contact Nickel City Funding to learn more about this and other mortgage solutions.